The New York Times Magazine
October 30, 2013
The President Wants You to Get Rich on Obamacare
By Adam Davidson

(Tom) Scully was scheduled to deliver the keynote address at an event
hosted by the Potomac Research Group, a Beltway firm that advises large
investors on government policy (tag line: "Washington to Wall Street").

When Scully finally began his speech, he noted that the prevailing
narrative among Republicans — assuming that many in the room were, like
him, Republican — was incorrect. "(Obamacare) is not a government
takeover of medicine," he told the crowd. "It's the privatization of
health care."

Scully then segued to his main point, one he has been making in
similarly handsome dining rooms across the country: No matter what
investors thought about Obamacare politically — and surely many there
did not think much of it — the law was going to make some people very rich.

A couple of years ago, Scully identified his best bet. NaviHealth, the
company he co-founded, is designed to streamline an enormous but often
overlooked corner of the health care market that, many studies conclude,
is the most financially wasteful: post-acute care, or the treatment of
patients (mostly seniors) after hospitalization for surgery or serious
illness.

Scully has a simple way of describing what NaviHealth — and much of the
Affordable Care Act — brings to medicine. "It's called capitalism," he
told me. "Which doesn't exist in health care, really."

In 2001, after George W. Bush appointed Scully the administrator of what
would soon be known as the Centers for Medicare and Medicaid Services,
he at last began to implement his ideas. Scully focused on designing and
executing Medicare Part D, which opened one corner of
government-provided health care — pharmaceuticals — to market forces.
This created a new role for a previously relatively obscure business,
the pharmacy benefit manager, or P.B.M., which streamlined
prescription-drug services. Express Scripts, a once modest Midwestern
company, used economies of scale to lead the effort in shifting seniors
from expensive name-brand drugs into generics. According to Fortune, it
is now the 24th-largest company in America.

By the time Medicare Part D went into effect in 2006, Scully, who was by
then in the private sector, put his theory to the test. He invested in a
smaller P.B.M., MemberHealth, which grew, in three years, from $6
million in revenue to $1.2 billion. "It was a hockey stick," he recalls.
"It took off like a rocket." When the A.C.A. was near passage, Scully
hoped to repeat the success. Once he and his partners at Welsh, Carson
realized no one else had seen the potential in post-acute care, he
thought he had another MemberHealth on his hands. "That's what I
expected with NaviHealth," he told me. "I felt the same way: we would
take off like a rocket."

On the morning that Congress finalized the deal that would reopen the
government and defeat — for a few weeks, at least — the latest
Republican effort to derail Obamacare, I visited Scully in his New York
office. Scully then began a set speech I had heard many times about how
Republicans don't understand the new health care law, that it's actually
more, not less, capitalistic than anything that came before.

Whether all this money flowing from Washington to Wall Street will
benefit the rest of us is another question. Glenn Hubbard, the
pre-eminent economist who helped devise George H. W. Bush's health plan
with Scully, told me that the cost of the A.C.A. will far outpace any
possible efficiencies. Dean Baker, an economist at the progressive
Center for Economic and Policy Research, told me that a government-run
single-payer plan would be far more beneficial.

Comment: Former CMS administrator Thomas Scully has been a major player
in injecting more capitalism into health care. This article describes
his mindset, including the fact that he intends to get his share of the
mega-wealth that health care privatization is creating.

Look at some of the trends:

* Medicare + Choice was established to allow private insurers to compete
with Medicare with the goal of eventually transforming our public
Medicare program into a market of private health plans.

* When the insurers couldn't compete, Medicare + Choice was replaced
with Medicare Advantage - a scheme designed to overpay private insurers
by 14% in order to give them an "advantage" in the Medicare marketplace
- with the intent of eventually displacing traditional Medicare.

* The Medicare Part D drug plan was designed to use private pharmacy
benefit managers - diverting a massive amount of taxpayer funds to the
capitalists, while prohibiting government negotiation of fair drug prices.

* The architects of the Affordable Care Act rejected a government
single-payer solution and set up exchanges of private insurance plans
that would siphon off more taxpayer dollars to pay for the private
sector's wasteful administrative excesses.

* Although the widely discussed "public option" would have had little
impact since it would not have changed our basic, fragmented health
financing infrastructure, nevertheless, even it was rejected as allowing
too much of a government role in a health insurance market that the
pro-market capitalists wanted to control completely.

* As a token tossed to the public option advocates, co-ops were
authorized in the Affordable Care Act. These organizations - to be
managed by representatives of the patients - were poisoned by a model
that saddled them with massive intolerable debt service that would make
it impossible to compete with the private insurers, not to mention that
they are prohibited from marketing their product to the public.
Competition is fine when the private sector is given unfair advantages
over government programs, but, in the minds of these capitalists, it is
unfair to allow a government or even quasi-government program to compete
against the private sector. The government cheats by unfairly providing
greater efficiency and value. Medicare's administrative costs are 1.4%
whereas the Affordable Care Act grants private insurers 15% to 20%
administrative costs including profits.

* The Affordable Care Act also gave a great boost to consumer-directed
health care - a concept of expanding the role of marketplace decisions
in the purchasing of health care. By establishing a low actuarial value
in the benchmark plans in the insurance exchanges - the patient pays a
greater percentage of health care costs out of pocket primarily through
high deductibles - much needed regulatory oversight is being replaced
with the flawed theory that price decisions in the marketplace will
bring health care costs under control.

* Under the false theory that government austerity measures are required
to stimulate a thriving market by limiting taxation, Medicare and Social
Security remain under threat by those who would privatize these programs
through measures such as Medicare vouchers.

We need to understand what Scully is trying to say: The law is going to
make some people very rich. Is that what we what from the most expensive
and most dysfunctional health care system of all wealthy nations? We
have been warned.

Dean Baker got only one line in this very long article: a government-run
single-payer plan would be far more beneficial. That should be our
take-home message.

In fiscal year 2012, the Department of Health and Human Services (HHS),
HHS Office of Inspector General (HHS-OIG), and the Department of Justice
(DOJ) obligated approximately $583.6 million to fund Health Care Fraud
and Abuse Control (HCFAC) program activities.

HHS, HHS-OIG, and DOJ use several indicators to assess HCFAC activities,
as well as to inform decision-makers about how to allocate resources and
prioritize those activities. For example, in addition to other
indicators, the United States Attorneys' Offices use indicators related
to criminal prosecutions, including the number of defendants charged and
the number of convictions. Additionally, many of the indicators that
HHS, HHS-OIG, and DOJ use—such as the dollar amount recovered as a
result of fraud cases—reflect the collective work of multiple agencies
since these agencies work many health care fraud cases jointly. Outputs
from some key indicators have changed in recent years. For example,
according to the fiscal year 2012 HCFAC report, the
return-on-investment—the amount of money returned to the government as a
result of HCFAC activities compared with the funding appropriated to
conduct those activities—has increased from $4.90 returned for every
$1.00 invested for fiscal years 2006- 2008 to $7.90 returned for every
$1.00 invested for fiscal years 2010-2012.

Comment: You frequently hear people say that we could control health
care costs if we were to get rid of fraud and abuse, as if efforts were
not already underway to do so. Our government is spending over half a
billion dollars on fraud detection with a recovery of almost eight
dollars for every dollar spent.

Furthermore, fraud is being detected in earlier stages, preventing
further loss, which is more effective than limiting recovery to "pay and
chase" approaches (trying to recover losses after the funds were
distributed). Also, CMS was able to revoke or deactivate the billing
privileges of tens of thousands of providers that did not meet Medicare
requirements.

The point is that we can't let single payer opponents dismiss the need
for the adoption of more efficient health care financing methods by
saying that we merely need to eliminate fraud and abuse. We need single
payer if we are going to achieve real savings.

In fiscal year 2012, the Department of Health and Human Services (HHS),
HHS Office of Inspector General (HHS-OIG), and the Department of Justice
(DOJ) obligated approximately $583.6 million to fund Health Care Fraud
and Abuse Control (HCFAC) program activities.

HHS, HHS-OIG, and DOJ use several indicators to assess HCFAC activities,
as well as to inform decision-makers about how to allocate resources and
prioritize those activities. For example, in addition to other
indicators, the United States Attorneys' Offices use indicators related
to criminal prosecutions, including the number of defendants charged and
the number of convictions. Additionally, many of the indicators that
HHS, HHS-OIG, and DOJ use—such as the dollar amount recovered as a
result of fraud cases—reflect the collective work of multiple agencies
since these agencies work many health care fraud cases jointly. Outputs
from some key indicators have changed in recent years. For example,
according to the fiscal year 2012 HCFAC report, the
return-on-investment—the amount of money returned to the government as a
result of HCFAC activities compared with the funding appropriated to
conduct those activities—has increased from $4.90 returned for every
$1.00 invested for fiscal years 2006- 2008 to $7.90 returned for every
$1.00 invested for fiscal years 2010-2012.

Comment: You frequently hear people say that we could control health
care costs if we were to get rid of fraud and abuse, as if efforts were
not already underway to do so. Our government is spending over half a
billion dollars on fraud detection with a recovery of almost eight
dollars for every dollar spent.

Furthermore, fraud is being detected in earlier stages, preventing
further loss, which is more effective than limiting recovery to "pay and
chase" approaches (trying to recover losses after the funds were
distributed). Also, CMS was able to revoke or deactivate the billing
privileges of tens of thousands of providers that did not meet Medicare
requirements.

The point is that we can't let single payer opponents dismiss the need
for the adoption of more efficient health care financing methods by
saying that we merely need to eliminate fraud and abuse. We need single
payer if we are going to achieve real savings.

The smartest thing yet written about the botched rollout of the
Affordable Care Act's federal exchange program is a post by Mike Konczal
of the Roosevelt Institute at his "Rortybomb" blog at Next New Deal.
Konczal makes two points, each of which deserves careful pondering.

The first point is that to some degree the problems with the website
have been caused by the overly complicated design of Obamacare itself.

Konczal's second point is even more important — the worst features of
Obamacare are the very features that conservatives want to impose on all
federal social policy: means-testing, a major role for the states, and
subsidies to private providers instead of direct public provision of
health or retirement benefits.

This point is worth dwelling on. Conservatives want all social
insurance to look like Obamacare. The radical right would like to
replace Social Security with an Obamacare-like system, in which mandates
or incentives pressure Americans to steer money into tax-favored savings
accounts like 401(k)s and to purchase annuities at retirement, with
means-tested subsidies to help the poor make their private purchases.
And most conservative and libertarian plans for healthcare for the
elderly involve replacing Medicare with a totally new system designed
along the lines of Obamacare, with similar mandates or incentives to
compel the elderly to buy private health insurance from for-profit
corporations.

Will the flaws of Obamacare really hurt the right and help center-left
supporters of universal social insurance? I doubt it.

To begin with, this implies a willingness of the right to acknowledge
that Obamacare, in its design, is essentially a conservative program,
not a traditional liberal one. But we have just been through a
presidential campaign in which Mitt Romney, who as governor of
Massachusetts presided over the creation of the most important model for
Obamacare, rejected any comparison of Romneycare with Obamacare

Nor are progressives likely to press the point in present or future
debates. Unlike conservatives, who are right-wingers first and
Republicans second, all too many progressives put loyalty to the
Democratic Party — most of whose politicians, including Obama, are not
economic progressives — above fidelity to a consistent progressive
economic philosophy. These partisan Democratic spinmeisters are now
treating Obamacare, not as an essentially conservative program that is
better than nothing, but as something it is not — namely, a great
victory of progressive public policy on the scale of Social Security and
Medicare.

In doing so, progressive defenders of Obamacare may inadvertently be
digging the graves of Social Security and Medicare.

If Obamacare — built on means-testing, privatizing and decentralization
to the states — is treated by progressives as the greatest liberal
public policy success in the last half-century, then how will
progressives be able to argue against proposals by conservative
Republicans and center-right neoliberal Democrats to means-test,
privatize and decentralize Social Security and Medicare in the years ahead?

I'm sure a number of token "centrist" Democrats will be found, in due
time, to support the replacement of Medicare by Lifelong Obamacare. And
with neoliberal Democratic supporters of the proposal as cover, the
overclass centrists of the corporate media will begin pushing for
Lifelong Obamacare as the sober, responsible, "adult" policy in one
unsigned editorial after another.

Once Medicare has been abolished in favor of Lifelong Obamacare, perhaps
by a future neoliberal Democratic president like Clinton and Obama,
Social Security won't last very long.

The conservative Republicans and centrist Democrats will argue that the
success of Obamacare, in both its initial version and the new and
improved Lifelong Obamacare version, proves that a fee-based,
means-tested, privatized and state-based system is superior to the
universal, federal, tax-based Social Security program enacted nearly a
century ago in the Dark Age known as the New Deal.

The genuine progressives will respond with a defense of Social Security.
Whereupon the faux-progressives, the neoliberal heirs of Carter, Clinton
and Obama, will reject the option of preserving Social Security — why,
that's crazy left-wing radical talk! — but insist that the subsidies for
the poorest of the elderly be slightly increased, as the price for their
adoption of the conservative plan to destroy Social Security. Throughout
the process, the right-wing Republicans and neoliberal Democrats will
ask, "How can progressives object to means-testing, privatization and 50
state programs, when those are the very features of the Obamacare system
that our friends on the left celebrate as a great achievement?"

Think about it, progressives. The real "suicide caucus" may consist of
those on the center-left who, by passionately defending the Affordable
Care Act rather than holding their noses, are unwittingly reinforcing
the legitimacy of the right's long-term strategy of repealing the
greatest achievements of American liberalism.

The Affordable Care Act, backed by President Barack Obama, focused on
the problem of coverage rather than costs. The ACA rejected the New
Deal/ Great Society tradition of universal, taxpayer-based social
insurance for the conservative alternative of tax expenditures and
individual mandates to purchase private health insurance.

While some elements of the law are laudable, as a whole the ACA combines
all of the faults of the bad approaches to public policy, while
rejecting the sound approach of universal federal social insurance.
Means-tested subsidies, tax expenditures, and elaborate federal-state
hybrid systems (in this case, health care exchanges) are all united in
an overly-complicated system. For working-age, non-poor Americans, the
Affordable Care Act (ACA) envisions a transition from system of tax
expenditures based on employers to another indirect system based on tax
subsidies to individuals purchasing insurance in state-created exchanges.

In the long run, the health insurance system should be integrated into a
single, life-long, comprehensive social insurance program. As a step in
that direction, Medicaid and SCHIP, two inefficient and unfair
federal-state hybrid programs, should be completely federalized and
merged with Medicare.

The U.S. health insurance system is likely to move either toward
efficient social insurance or toward inefficient and costly
voucherization of the social insurance elements like Medicare and
Medicaid, combined with rationing of health care of a kind unknown in
other advanced industrial democracies. For reasons of solvency and
fairness alike, health insurance needs to be absorbed into an expanded,
comprehensive American social insurance system.

Comment: Mike Konczal's article covered in yesterday's Quote of the Day
message has received considerable attention in the blogs, since his
concept was a real eye opener. While most are distracted by the
temporary kludge of the opening of the federal Obamacare exchange
website, the real lesson is that the complexity of coordinating all of
the entities that are involved in enrolling individuals into the
exchange plans confirms the complexity of Obamacare itself. The
computers will be fixed, but Obamacare can never be.

Michael Lind of the New America Foundation elaborates on Konczal's
observation that the neoliberal Democrats have adopted the
conservatives' model of reform - "a fee-based, means-tested, privatized
and state-based system." Even though neoliberals and conservatives
theoretically are bitter enemies (witness the insults hurled over the
shutdown of the government), and battle publicly over Obamacare, they
are silent partners in delivering to the nation the
Heritage/Romney/Clinton/Obama model of a largely privatized health care
financing system.

The New Deal/Great Society approach to our social insurance programs -
Medicare and Social Security - was to make them federally administered
and federally financed, an approach then supported by centrists and
liberals. Now we have a conservative program - Obamacare (that really
isn't social insurance, especially when considering how many are left
out) - that is now supported by centrists and silently by conservatives
(e.g., Ryan's Republican voucher plan for Medicare).

Publicly, only the liberals are standing up for expanding an improved
version of Medicare to cover everyone. Many of the centrists also
support it but are toeing the neoliberal line of Democratic Party
loyalty by remaining silent (not to mention the fear of offending their
health industry campaign contributors). Most conservatives recognize the
superiority of the single payer model in achieving the goals of
universality, equity, and affordability, but many are also libertarians
and are opposed to those goals simply because of their ideology.

We need to abandon the process of trying to meet on common ground
through the Democratic and Republican parties. Virtually all liberals,
most moderates, and some conservatives agree that everyone should have
health care and that it should be financed equitably through an
administratively efficient program. When we vote we should ignore the
candidates' political parties, but instead vote based on their advocacy
for health care justice (and other forms of social justice). For those
who do not think that is feasible, all we need is more visibility (a
cryptic comment if there ever was one, but use your imagination).

Next New Deal, The blog of the Roosevelt Institute
October 23, 2013
What Kind of Problem is the ACA Rollout for Liberalism?
By Mike Konczal

Healthcare.gov looks to be having a disastrous launch.

Conservatives in particular think this website has broad implications
for liberalism as a philosophical and political project. I think it
does, but for the exact opposite reasons: it highlights the problems
inherent in the move to a neoliberal form of governance and social
insurance, while demonstrating the superiorities in the older, New Deal
form of liberalism.

The general problem is that "More than 30 states refused to set up their
own exchanges, requiring the federal government to vastly expand its
project in unexpected ways."

Category A Social Insurance

1. is heavily means-tested

2. is provided by private agents to individuals

3. leaves open the possibility of adverse selection because of market
segmentation

4. gives discretion to the states to either help or undermine the process

5. is designed to ensure choice and competition

Category B Social Insurance

1. is a program that is universal to all who qualify for it

2. has the government running the system itself

3. uses compulsion to default people into social insurance to prevent
adverse selection

4. situates the program at the federal level, to avoid states undermining it

5. does all this to ensure better provisioning outcomes, using
government's scale and efficiency

What we often refer to as Category A can be viewed as a "neoliberal"
approach to social insurance, heavy on private provisioning and
means-testing. This term often obscures more than it helps, but think of
it as a plan for reworking the entire logic of government to simply act
as an enabler to market activities, with perhaps some coordinated
charity to individuals most in need.

This contrasts with the Category B grouping, which we associate with the
New Deal and the Great Society. This approach creates a universal floor
so that individuals don't experience basic welfare goods as commodities
to buy and sell themselves. This is a continuum rather than a hard line,
of course, but readers will note that Social Security and Medicare are
more in Category B category rather than Category A. My man Franklin
Delano Roosevelt may not have known about JavaScript and agile
programming, but he knew a few things about the public provisioning of
social insurance, and he realized the second category, while
conceptually more work for the government, can eliminate a lot of
unnecessary administrative problems.

The choice between Category A and B above will characterize much of the
political debate in the next decade. It's important we get more
sophisticated analysis of what has gone wrong with the ACA rollout to
better appreciate how utilizing "the market" can be far more cumbersome
and inefficient than the government just doing things itself.

The New York Times
October 26, 2013
Why Is Obamacare Complicated?
By Paul Krugman

Mike Konczal says most of what needs to be said about the underlying
sources of Obamacare's complexity, which in turn set the stage for the
current tech problems. Basically, Obamacare isn't complicated because
government social insurance programs have to be complicated: neither
Social Security nor Medicare are complex in structure. It's complicated
because political constraints made a straightforward single-payer system
unachievable.

It's been clear all along that the Affordable Care Act sets up a sort of
Rube Goldberg device, a complicated system that in the end is supposed
to more or less simulate the results of single-payer, but keeping
private insurance companies in the mix and holding down the headline
amount of government outlays through means-testing. This doesn't make it
unworkable: state exchanges are working, and healthcare.gov<http://healthcare.gov> will probably get fixed before the whole thing
kicks in. But it did make a botched rollout much more likely.

So Konczal is right to say that the implementation problems aren't
revealing problems with the idea of social insurance; they're revealing
the price we pay for insisting on keeping insurance companies in the
mix, when they serve little useful purpose.

So does this mean that liberals should have insisted on single-payer or
nothing? No. Single-payer wasn't going to happen — partly because of the
insurance lobby's power, partly because voters wouldn't have gone for a
system that took away their existing coverage and replaced it with the
unknown. Yes, Obamacare is a somewhat awkward kludge, but if that's what
it took to cover the uninsured, so be it.

The intellectually serious debate is between those who believe that the
government should simply provide basic health insurance for everyone and
those proposing a more complex, indirect approach that preserves a
central role for private health insurance companies.

A system in which the government provides universal health insurance is
often referred to as "single payer," but I like Ted Kennedy's slogan
"Medicare for all." It reminds voters that America already has a highly
successful, popular single-payer program, albeit only for the elderly.
It shows that we're talking about government insurance, not
government-provided health care. And it makes it clear that like
Medicare (but unlike Canada's system), a U.S. national health insurance
system would allow individuals with the means and inclination to buy
their own medical care.

The great advantage of universal, government-provided health insurance
is lower costs. Canada's government-run insurance system has much less
bureaucracy and much lower administrative costs than our largely private
system. Medicare has much lower administrative costs than private
insurance. The reason is that single-payer systems don't devote large
resources to screening out high-risk clients or charging them higher
fees. The savings from a single-payer system would probably exceed $200
billion a year, far more than the cost of covering all of those now
uninsured.

Nonetheless, most reform proposals out there - even proposals from
liberal groups like the Century Foundation and the Center for American
Progress - reject a simple single-payer approach. Instead, they call for
some combination of mandates and subsidies to help everyone buy
insurance from private insurers.

Some people, not all of them right-wingers, fear that a single-payer
system would hurt innovation. But the main reason these proposals give
private insurers a big role is the belief that the insurers must be
appeased.

That belief is rooted in recent history. Bill Clinton's health care plan
failed in large part because of a dishonest but devastating lobbying and
advertising campaign financed by the health insurance industry -
remember Harry and Louise? And the lesson many people took from that
defeat is that any future health care proposal must buy off the
insurance lobby.

But I think that's the wrong lesson. The Clinton plan actually preserved
a big role for private insurers; the industry attacked it all the same.
And the plan's complexity, which was largely a result of attempts to
placate interest groups, made it hard to sell to the public. So I would
argue that good economics is also good politics: reformers will do best
with a straightforward single-payer plan, which offers maximum savings
and, unlike the Clinton plan, can easily be explained.

We need to do this one right. If reform fails again, we'll be on the way
to a radically unequal society, in which all but the most affluent
Americans face the constant risk of financial ruin and even premature
death because they can't pay their medical bills.

Comment: Mike Konczal's article makes important distinctions between
social insurance along the lines of private market provisioning
(neoliberal), as with the Affordable Care Act, and social insurance
along the lines of public provisioning (New Deal liberal), as with
single payer, and why "utilizing 'the market' can be far more cumbersome
and inefficient than the government just doing things itself."

Paul Krugman reinforces Konczal's thesis by saying that the
implementation problems are "revealing the price we pay for insisting on
keeping insurance companies in the mix, when they serve little useful
purpose." Yet Krugman says liberals were correct in not insisting on
single payer, because Obamacare, a kludge, was "what it took to cover
the uninsured." He remains silent on the fact that 31 million will still
remain uninsured.

Krugman's statement is a far cry from what he wrote in 2005. He rejected
the so-called lesson of the Clinton fiasco - that any reform must buy
off the private insurance industry - writing then, "good economics is
also good politics: reformers will do best with a straightforward
single-payer plan."

Konczal's astute framing of private social insurance versus government
social insurance can be useful in our advocacy work since it makes it
very clear why it is imperative that we first get policy right, and then
conform the politics to match the policy. The great tragedy of Obamacare
is that we strangled the policies in order to protect our terribly
flawed politics.

Responding to the announcement that the president of Global Health and
group executive vice-president at UnitedHealth, Simon Stevens, will take
on the role of chief executive of NHS England in April next year, UNISON
Head of Health Christina McAnea said:

"The NHS is facing its first serious crisis for the best part of the
decade, and it is critical that Simon Stevens respects and shares the
values of our NHS – universal healthcare that is free at the point of need.

"It is surprising that no one within the NHS has been found to take on
this position. We sincerely hope this is not a sign that the government
wants to import America-type values into the NHS and look at ways of
developing healthcare through an insurance model. If this is the
intention there will be massive opposition.

"Mr Stevens will have his work cut out for him right from the start. Far
from being protected from government cuts, the NHS is being starved of
the funds it needs. Thousands of jobs are under threat and accident and
emergency departments are creaking under the pressure of cuts,
privatisation and upheaval."

The Guardian
October 24, 2013
Simon Stevens, new head of NHS England, is in for a rude awakening
Under Labour, Stevens began the culture of competition in health. He
will now find out just how perverse this has become
By Polly Toynbee

As he sowed, so shall he reap. Simon Stevens will get his just deserts
as he takes up the reins of NHS England, only to find this horse has no
bridle or bit, galloping out of anyone's control. That was, of course,
precisely the explosive "creative destruction" Andrew Lansley intended.
Stevens returns from the biggest US health company to an NHS whose
current path he designed as Tony Blair's adviser. Now he must piece
together some coherence from the fragments of what Sarah Wollaston, MP
and GP, called "a grenade" tossed into the NHS.

As Lansley outlined his scheme in 2010, Stevens wrote a paean of praise
in the Financial Times. It reads as a touchingly optimistic vision,
where choice and competition in a perfect market deliver everything a
patient or GP could desire. When he sees what he's inherited, he may get
a rude awakening. But he shares the blame, claiming authorship: "What
makes the coalition's proposals so radical is not that they tear up
(our) earlier plan," but "move decisively towards fulfilling it – in a
way that Mr Blair was blocked from doing by internal opposition".

He lists the plan's glories: in "the new model NHS, patients are rightly
being promised that 'no decision will be made about me, without me'". No
sign yet of that. He praises "the severing of day-to-day political
control of the NHS", but now he'll find his own control severed. How
will he marry his vouchers for pregnant women with wildly unpopular
maternity closures? His hope that "patient power will become real, GP
commissioners will fire on all cylinders and hospitals will be liberated
to innovate" is a world away from today's NHS.

But his greatest regret may be his praise for "the decision to extend
competition law across the health sector and treat the NHS as a
regulated utility, with an economic regulator – Monitor". Faith in
competition fills his writings – but reality is biting back. Monitor,
engine of NHS competition, has only just understood its destructive
force: its chief executive, David Bennett, recently recoiled, saying
Monitor would be "mad" to enforce the Lansley competition rules leaving
commissioners to "spend all their time running competitive processes
because they're terrified they're going to get in trouble if they
don't". Too late now.

So far, 63% of contracts have been put out to tender by clinical
commissioning groups (CCGs), now run by just a few GPs. The 211 CCGs are
widely regarded as no match for the private sector in writing complex
contracts. Section 75 of the Health and Social Care Act forces them to
put all but a few services out or risk any putative bidder challenging
them in court. Bringing competition law into the NHS means no one can
control these unleashed forces.

Watch Stevens demand more changes to the law if he's to control the
unfolding chaos. Half of NHS trusts have announced a deficit for this
year – that's unprecedented – yet by 2017 the NHS must "save" £30bn. The
Care Quality Commission says one in four hospitals are a safety risk,
but their inspections aren't allowed to count numbers of staff: the NHS
has haemorrhaged 6,000 nurses since 2010. Many CCGs that control NHS
funds are chaotic, with services falling between gaps, no one paying for
them. Privatisation rushes on, at least £11bn so far, but private
providers escape the NHS duty of openness or freedom for whistleblowers.
Waiting times are rising, ambulance and A&E times growing, as the social
care crisis blocks NHS beds with winter approaching.

Stevens will find many perversities in the competition culturre. He said
top-down control was a disaster – but he may find fragmentation and lack
of strategic control far worse. Can he make his perfect market work – or
admit he might have been wrong?

Comment: The National Health Service in England currently exemplifies
the greatest problem with publicly-administered and publicly-financed
national health programs: They become subject to privatization efforts
whenever conservatives gain control of the government. Selecting
UnitedHealth's Simon Stevens as chief executive of NHS England surely
advances Conservative Prime Minister David Cameron's privatization scheme.

When do you suppose UnitedHealth will put in a bid to purchase the NHS?
It would be great for Cameron's budget, though the people would lose out.

The New York Times
October 23, 2013
Health Care Law Fails to Lower Prices for Rural Areas
By Reed Abelson, Katie Thomas and Jo Craven McGinty

As technical failures bedevil the rollout of President Obama's health
care law, evidence is emerging that one of the program's loftiest goals
— to encourage competition among insurers in an effort to keep costs low
— is falling short for many rural Americans.

While competition is intense in many populous regions, rural areas and
small towns have far fewer carriers offering plans in the law's online
exchanges. Those places, many of them poor, are being asked to choose
from some of the highest-priced plans in the 34 states where the federal
government is running the health insurance marketplaces, a review by The
New York Times has found.

Of the roughly 2,500 counties served by the federal exchanges, more than
half, or 58 percent, have plans offered by just one or two insurance
carriers, according to an analysis by The Times of county-level data
provided by the Department of Health and Human Services. In about 530
counties, only a single insurer is participating.

The Obama administration, while not disputing the findings, responded to
the analysis in a statement that the marketplaces "allow insurers to
compete for customers based on price and quality."

Observers cautioned against drawing too many conclusions from the
current landscape, noting that several major insurers were waiting to
see what happens next.

Health insurance rates are so high in Colorado's mountain resort areas
that U.S. Rep. Jared Polis plans to seek waivers from the federal
government so people who skip buying insurance in 2014 won't face
financial penalties.

Health coverage guides working to enroll Summit County residents in new
health plans through Colorado's health exchange have been deeply
disappointed. They have not enrolled a single new client since
Colorado's health exchange launched on Oct. 1.

Comment: Another flaw in Obamacare is the failure in rural areas to
make premiums affordable through health plan competition, primarily
because the markets are too small to attract enough insurers to promote
competition.

An example is found in the Colorado mountain resort areas such as Summit
County where not one person has been enrolled through the exchange.

How many times do we have to say it? The Affordable Care Act was the
wrong model for reform. It leaves in place our profoundly expensive,
administratively inefficient, fragmented, dysfunctional health care
financing system. Compared to what needed to be done, the improvements
were only marginal, and some of the problems actually increased, such as
underinsurance - plans that provide less health security and less
financial security than many of us had before.

Besides, even in areas with greater plan competition, health care costs
are still out of control. A publicly-administered single payer program
is far more effective in getting health spending right than is health
insurer competition.

Washington Monthly
Political Animal
October 21, 2013
The Restive Single Payer Tribe
By Ed Kilgore

But if I were in the White House, I'd keep an eye on one issue they
might not have thought much about in quite some time: the revival of
progressive hostility to Obamacare on grounds that the law reflected a
"sell-out" of the obvious single-payer solution to the problems of the
health care system.

I'm not going to relitigate the whole
single-payer-versus-managed-competition debate that's been going on for
decades, or even the argument that a managed competition model requires
a "public option" to function properly. But whatever else it is, a
single-payer system is a whole lot simpler and more predictable than
anything that not only accepts but insists upon a publicly regulated and
subsidized private health insurance marketplace.

Single-payer fans (or those strongly favoring a public option in a
hybrid system) are never going to have much in common with conservatives
who don't believe in universal access to affordable health care and want
to disable or repeal the public programs we already have. But if the one
thing they do have in common — disdain for the messy hydraulics of any
hybrid system — becomes the center of attention and stays there, watch out!

(Ed Kilgore is a contributing writer to the Washington Monthly. He is
managing editor for The Democratic Strategist and a senior fellow at the
Progressive Policy Institute.)

Comment: It is fair to say that Ed Kilgore represents the views of
neoliberals who have taken control of the Democratic Party and moved it
to the right: that is, he represents centrist views. What is striking
about his message is that the intensive political attacks on Obamacare
by the conservatives are assisting single payer advocates who are busy
exposing its profound policy deficiencies. With their noise, and our
reasoned policy prescriptions, middle America may be ready to move to
single payer much sooner than expected.

Health Affairs Blog
October 22, 2013
Predicting ACO Formation: Two Studies With More In Common Than It Might Seem
By Valerie Lewis, Carrie Colla, and Elliott Fisher

At a time when policy makers, providers and payers are all trying to
make high stakes decisions about how respond to the proliferation of
Accountable Care Organizations (ACOs), divergent research findings might
feel as welcome as rain on the fourth of July.

Two recently published studies, one by our group at Dartmouth and one by
David Auerbach and coauthors in Health Affairs, both examined predictors
of ACO formation. On the surface, they appear to have some inconsistent
findings. Their core conclusions, however, are similar, and differences
in the results are readily explained. Most importantly, policy
implications are well aligned: there is much we can do to help the
transition to accountable care succeed.

A common set of policy implications.

The findings in both studies also point to challenges that deserve
further attention by policy makers. How can providers without
experience in risk-based contracts or who are in smaller, more
fragmented practices get the additional support they may need to become
an ACO? Models like the Medicare Advance Payment model are one move to
support these types of providers, but our results here and elsewhere
suggest that policymakers should be further developing programs to
support the financing of these systems, along with the development of
analytic and care coordination capabilities that are likely necessary
for ACO success.

Another important question:

How can spending and quality benchmarks be refined to encourage broader
participation? Some (including us) have suggested that paying for
improvement rather than absolute performance on quality may encourage
underperforming systems to join the ACO model. Careful thinking is
necessary from health economists and health care finance experts on how
to set cost targets that do not penalize providers already on the low
end of the cost spectrum.

The imperative of continued learning.

Perhaps the most important conclusion, however, is to acknowledge the
many uncertainties that remain. The transition to performance-based
payment systems has barely begun – and better information on what is
working and what isn't would make successful reform more likely.

Comment: If you are holding your breath to see if accountable care
organizations (ACOs) are the answer to our quality and cost issues, I
have some life-saving advice for you. Don't wait, but breathe immediately!

Elliott Fisher from the Dartmouth Institute has been credited with
coining the term, accountable care organization. Look at what he and his
colleagues have to say: The most important conclusion is that many
uncertainties remain.

One of the more important reasons for the uncertainties is that there
remains a conflict between those who support better integration of
health care (a noble goal) and those who support a business model that
smacks of MBA-driven managed care (an ignoble goal).

There are no uncertainties with the single payer model. We should
proceed immediately to the enactment of an improved Medicare for all,
and then we can afford to take years to study variations of the ACO
model to see if we can improve health care delivery.

The Globe and Mail
October 2, 2013
Obamacare vs. Canada: Five key differences
By Antonia Maioni

Despite the partisan war in Washington that shut down the federal
government this week, President Barack Obama has succeeded in
implementing the first major health reform in the United States in
nearly 50 years, as the Patient Protection and Affordable Care Act goes
into effect. Even though its most virulent critics raise the spectre of
"Canadian-style" health care, "Obamacare" does little to change the
enduring differences between the two health care system. What, exactly,
does "Obamacare" look like compared to Canada?

Not single-payer:

Canadian critics tend to rail against "two-tiered" medicine, but in
fact, the U.S. has a multi-tiered system. And despite the hype on both
sides of the Congressional aisles, Obamacare keeps the same complex
structure in place, while adding another layer through the introduction
of health care "exchanges" for uninsured Americans. But the majority of
Americans will continue to access care through a variety of health
insurance plans made available or subsidized by their employer; nearly
50 million elderly and disabled through the federal Medicare program;
another 60 million lowest-income through state-federal Medicaid
arrangements.

Not universal coverage:

Health care in Canada is based on a simple proposition: every legal
resident is covered through a publicly-financed provincial or
territorial plan. The individual mandate, derived from a Republican
precedent in Massachusetts, stands in stark contrast to Canada's
universality principle. Even though Obamacare broadens coverage, the
individual mandate relies on a fundamental insurance principle – care
depends on type of coverage – and compels Americans to purchase
insurance to access care. Americans now have more affordable insurance
options and subsidies to cover their costs, and the lowest-income may be
eligible for public coverage through the expansion of Medicaid. Still,
despite the crush of online traffic as enrolment began Tuesday, only
half of the estimated 40-plus million uninsured will be affected by
Obamacare.

Not "national" health insurance:

One of the hallmarks of health care in Canada is that, although each
province and territory administers a health plan, everyone can expect to
be covered for a comprehensive range of services, no matter where they
live. And the federal government is expected to chip in to provincial
coffers to make this happen. There's plenty of intergovernmental
friction as a result, but nothing like the fractured federalism of the
United States. The implementation of Obamacare will further exacerbate
regional and state differences, mainly as a result of the Supreme Court
decision to curtail the federal government's obligation for states to
expand their Medicaid coverage. As a result, only about half of the
states have chosen to sign on to the new Medicaid program.

Not equal access:

There's been some controversy in Canada lately over wait times and
access to timely care, but this pales in comparison to the wide gulf
that exists in access to care in the United States. Obamacare tries to
address this in its provisions for insurance reform, such as lifting
pre-existing conditions and limits on co-payment. But for all of the
emphasis on affordable care, the new law reinforces the notion that
access depends on how much you can afford, not how much you need. In the
health insurance exchanges, the price of premiums will depend on your
age, health, income, and on whether you opt for a bronze, silver, gold
or platinum coverage. In Canada, access to necessary health care
services is not a competitive sport.

Not cost containment:

The sharpest critics of Obamacare argue it does little to address the
fundamental challenge of cost control. The new law includes a review of
Medicare reimbursement and the expansion of Accountable Care
Organizations to reward cost-effective care. But it doesn't grapple in a
systematic fashion with the overall inefficiencies in health care
delivery and financing, the administrative burden of multiple payers,
providers and plans, and the cost pressures of defensive medicine.
Governments in Canada know that health care is a searing financial
responsibility, but they have at their disposal cost containment
measures – monopoly fee negotiations with providers, global budgets for
hospitals – that remain unfathomable in the American context.

Obamacare is a huge step in American health reform and, if it seen to
improve the system, will represent a major victory for Democrats. Like
other major reforms of the past, however, it will entrench the private
nature of the system, and likely render national health insurance, or
anything remotely like "Canadian-style" health care, impossible to attain.

Comment: It is frequently said that Obamacare will lead to a
Canadian-style single payer system - a statement of optimism by some
supporters, and a threat by opponents. McGill University Professor
Antonia Maioni explains why Obamacare will do no such thing.

Many of the Quote of the Day messages describe very serious flaws in the
Obamacare model - flaws that perpetuate high costs, administrative
excesses, impairments in access, and many other unjust inequities
inherent in our system. I frequently receive messages stating that I
should cease criticizing Obamacare, and, instead, I should be supporting
Obamacare measures as incremental steps leading to single payer.
Although we do not want to reject even minimal improvement in our
system, most of the serious structural flaws cannot be corrected with
simple remedial legislation.

Professor Maioni explains some of the fundamental structural defects in
the U.S. financing system that cannot be merely tweaked to get it right.

As Professor Maioni states, "Obamacare… will entrench the private nature
of the system, and likely render national health insurance, or anything
remotely like 'Canadian-style' health care, impossible to attain."

The incremental path to single payer through Obamacare has no bridge
across the chasm. It would be a tragedy to spend a decade or two,
standing on one edge of the chasm, looking across and trying to figure
out how legislative patches can build a bridge to the other side, when
patches cannot repair a bridge that doesn't even exist. Only a new
infrastructure will do. We must begin building a single payer system
with all due haste.

Health Affairs Blog
October 16, 2013
Implementing Health Reform: The State Of The Exchanges, Income
Verification, And More
By Timothy Jost

Information collection.

On October 11, 2013, HHS published a notice of information it was
intending to collect to establish individual mandate exemptions.

There is nothing new in this notice, but the scope and number of
exemptions from the ACA's individual responsibility requirement are
truly impressive. In addition to the religious conscience, health care
sharing ministry, incarceration, Native American tribe membership, and
lack of affordable coverage exemptions, there is an extensive list of
hardship exemptions, including:

* Homelessness;

* Eviction in the previous 6 months or the threat of eviction or
foreclosure;

* A utility shut-off notice;

* Recent death of a close family member;

* A fire, flood, or other natural or human-caused disaster that caused
substantial property damage;

* A bankruptcy filing in the last 6 months;

* Medical expenses in the past 24 months that could not be paid;

* Unexpected increases in necessary expenses due to caring for an ill,
disabled, or aging family member;

* The presence in the household of a child claimed as a tax dependent
who was denied coverage in Medicaid and CHIP where another person is
required by court order to give medical support to the child. In this
case, the penalty need not be paid for the child;

* A favorable eligibility appeals decision that makes an individual
eligible for enrollment in a qualified health plan (QHP) through the
Exchange, lower the costs on monthly premiums, or provides cost-sharing
reductions, which removes the penalty for the time the individual was
not enrolled in a QHP through the Exchange; or

* Residence in a state that fails to expand Medicaid if the individual
would have been eligible for Medicaid.

HHS estimates that 24 million Americans will be eligible for individual
responsibility exemptions and that as many as 12 million will apply for
exemptions through the exchange. In most instances, documentary
evidence will need to be supplied to verify the exemption. Unless the
federal exchange website is vastly improved in the not too distant
future, this could create major problems for the implementation of the
individual responsibility requirement.

Comment: The Affordable Care Act includes multiple categories of
exemptions from the shared responsibility payment - the penalty for
remaining uninsured. This new CMS release defines the category of
hardships which would allow you to remain uninsured without having to
pay a penalty. When you check the list, it seems that most of these
hardships would indicate a greater need for having health care coverage.
But instead of seeking ways to fill these gaps, ACA simply cuts these
people loose with no coverage at all.

The largest category of those who are exempt from the requirement to be
insured are those who simply cannot afford to pay for their share of
health insurance premiums. That includes families whose incomes are so
low that they are not required to file income tax returns, and
individuals who would have to pay more than 8% of their incomes for
premiums beyond employer contributions or tax credits for the exchange
plans. It includes individuals who would have been eligible for Medicaid
but are excluded simply because their states elected not to participate
in the Medicaid expansion.

HHS estimates that 24 million Americans will be eligible for exemptions
from the shared responsibility payments. That is, 24 million individuals
will have the right to remain uninsured without having to pay a penalty.
That is quite a stipulation for an Act that was supposed to bring health
care to everyone. 24 million!

Clearly our politicians selected the wrong model for reform. We do not
have to put up with this. If enough of us protest vehemently, we should
be able to get our politicians to replace this highly dysfunctional
system with a single payer national health program - an improved
Medicare that covers everyone - absolutely everyone.

The Kaiser Commission on Medicaid and the Uninsured
October 2013
The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand
Medicaid

The expansion of Medicaid, effective in January 2014, fills in
historical gaps in Medicaid eligibility for low-income adults and has
the potential to extend health coverage to millions of currently
uninsured individuals. This expansion essentially sets a national
Medicaid income eligibility level of 138% of poverty (about $27,000 for
a family of three) for adults. The expansion was intended to be national
and to be the vehicle for covering low-income individuals, with premium
tax credits for Marketplace coverage serving as the vehicle for covering
people with higher incomes. However, the June 2012 Supreme Court ruling
made the expansion of Medicaid optional for states, and as of September
2013, 26 states did not plan to implement the expansion.

In states that do not expand Medicaid, over five million poor uninsured
adults (5.2 million people) have incomes above Medicaid eligibility
levels but below poverty and may fall into a "coverage gap" of earning
too much to qualify for Medicaid but not enough to qualify for
Marketplace premium tax credits. Most of these people have very limited
coverage options and are likely to remain uninsured.

The ACA envisioned people below 138% of poverty receiving Medicaid and
thus does not provide premium tax credits for the lowest income. As a
result, individuals below poverty are not eligible for Marketplace tax
credits, even if Medicaid coverage is not available to them. Individuals
with incomes above 100% of poverty in states that do not expand may be
eligible to purchase subsidized coverage through the Marketplaces;
however, only about a third of uninsured adults (3.2 million people) who
could have been eligible for Medicaid if their state expanded fall into
this income range. Thus, there will be a large gap in coverage for
adults in states that do not expand Medicaid.

Comment: According to this report, "Nationally, over five million poor
uninsured adults will fall into the 'coverage gap' that results from
state decisions not to expand Medicaid, meaning their income is above
current Medicaid eligibility but below the lower limit for Marketplace
premium tax credits." That is, they are not eligible for Medicaid, and
at an income below 138% of the federal poverty level, they are not
eligible for subsidies and therefore cannot possibly afford to purchase
private plans. They will remain uninsured, even though they have the
least ability to pay out-of-pocket for health care.

These individuals falling into the coverage gap represent about
one-sixth of the total number of individuals who will remain uninsured
(31 million). Supposedly the Affordable Care Act was designed to make
health care affordable for everyone, with an emphasis on Medicaid or
private plan subsidies for those who could least afford to pay for
coverage. By this standard, ACA can be considered a dud.

Let's do it right. Let's enact a single payer national health program
that provides health care for everyone while separating the funding by
moving it to the tax system. That would eliminate any connection between
receiving health care and having to pay for it. Needing health care is
bad enough without being assessed charges (in essence financial
penalties) for obtaining that care.

The New York Times
October 12, 2013
Out of Network, Out of Luck
By Theresa Brown

For several hundred patients at the University of Pittsburgh Medical
Center, it started with a certified letter informing them that they were
no longer allowed to see their physicians. The reason? They were unlucky
enough to have insurance called Community Blue, which is offered by a
rival hospital system. Astoundingly, they were barred even if they could
pay for the care themselves.

One patient, in the middle of treatment for lung cancer, said at a
hearing before a State House of Representatives committee that she was
prohibited from seeing her U.P.M.C. oncologist. Another, with the
debilitating autoimmune disease scleroderma, said she was dismissed from
the U.P.M.C. Arthritic and Autoimmune Center. A third, a five-year
breast cancer survivor who needs follow-up care every six months, was
cut off from the doctor who had been with her since she was first given
her diagnosis.

Community Blue is sold by a company called Highmark. Like U.P.M.C., it
is both a hospital system and an insurance provider, part of a growing
trend toward vertical consolidation in the two industries. These and
other companies insist that such consolidation streamlines the
caregiving system and thus benefits the patient. But in the short term,
they are waging a vicious war over patients — and as the experience in
Pittsburgh shows, it's often the patients who are losing.

Historically, U.P.M.C. was the biggest health care provider in
Pittsburgh and Highmark the largest insurer. U.P.M.C., though, has been
selling its own brand of insurance for over a decade, and Highmark
recently affiliated with a local multisite hospital system, now known as
the Allegheny Health Network.

U.P.M.C. responded to the formation of the Allegheny Health Network by
labeling Highmark a competitor and a threat to its financial
sustainability. It has also announced that its current contract with
Highmark will not be renewed, meaning that in December 2014 almost all
U.P.M.C. hospitals will be open to Highmark customers only at
out-of-network rates, which are among the highest in the country.

At the same time, U.P.M.C. is running an aggressive ad campaign for its
own health insurance plan, and Highmark subscribers with Community Blue
have been denied access to their U.P.M.C. physicians.

More health systems nationally are following the lead of U.P.M.C. and
Highmark, combining health insurance with the provision of care itself.

The worry is that integration will yield not better care but higher
profits achieved through monopolistic consolidations and self-serving
business practices.

Comment: Integrating health care is a great concept that theoretically
should improve coordination of care, reduce duplication, provide
incentives to meet quality and outcome targets, improve access to
appropriate specialized care - in general, improving quality while
reducing costs. That is the idea behind the Accountable Care
Organizations established by the Affordable Care Act. How is it working
out in the real world?

We've watched as insurers have consolidated. Although they tout that
they are providing higher quality at lower costs through managed care,
in fact they have used their oligopolistic leverage to limit patient
access to their selected network providers. Although they contend that
they are selecting the highest quality providers, in fact, they are
excluding quality institutions such as academic medical centers and
going with the cheapest contracts they can extract from the health care
community.

In response, we are witnessing an explosion in consolidation of health
care providers - hospitals and physician groups - often into single
entities. Obviously this results in "must have" groups that in turn have
leveraged their oligopolistic negotiating power in dealing with the
insurers.

Not to be outdone, we are now seeing insurers and consolidated health
care systems joining together to increase their control of markets, and
thereby share in the spoils. When you see patients with lung cancer,
breast cancer, and scleroderma being cut off from their care strictly on
the basis of realignment of the health care business models, you can
dismiss the concept that these changes are changes that are designed to
benefit patients. The ugly competition that is taking place between
Physician-hospital-insurer entities (Phi) is cutthroat and certainly not
in the patients' best interests. (Phi seems to be an appropriate symbol
for these entities since, in Lacanian psychoanalysis, it is the symbol
for "the phallic function.")

The Affordable Care Act very specifically was designed to keep control
in the private sector. Private sector business models will always do
what they are designed to do - anything to make more money. If we really
do want a system designed to provide the best care possible with our
available resources, we need to dismiss the private insurers and put our
own public stewards in charge. They would have the responsibility of
answering to us.

Venture Valkyrie
October 6, 2013
Here Come the Exchanges…And an Opportunity to Turn Chaos Into Gold
By Lisa Suennen

The new health instance exchanges (HIXs) create a direct relationship
between consumers and health insurers in a way that has never existed
before, and with that comes the need to fundamentally disrupt
traditional methods of delivering health insurance products. Not since
the advent of employer-paid health insurance after World War II or the
start of the Medicare program in 1966 has there been such a broad-scale
opportunity for health system transformation. There are few markets that
are mandated by law to include virtually every single American man,
woman and child, making the opportunity particularly juicy to investors.
For those entrepreneurs who figure out how to transfer the secret sauce
from cheeseburgers that impair health to insurance-related products and
services that improve it, the next few years offer an opportunity to
turn market confusion into gold.

Among the biggest opportunities are investments in technologies and
services that power the new healthcare exchanges. Venture-backed
companies, such as GetInsured.com, have emerged to provide the various
state-sponsored exchanges with the back-end technology that enable
comparison-shopping, financial transactions and enrollment support
essential to operating the HIX marketplaces.

But while state and federal healthcare insurance exchanges are the main
topic of conversation this week, much of the real action has and will
continue to take place in private exchanges serving the large and small
employer market, particularly as employers do the math and figure out it
may be in their financial best interest to end their role as benefit
plan intermediaries.

Private HIXs: The Big Innovation Opportunity

There are important differences between public and private exchanges
that make the investment opportunity particularly good on the private
side. Most importantly, private exchanges can more broadly customize and
personalize the products offered, as well as the consumer experience
itself. And this is key, because for the very first time, health
insurance companies are being forced to sell directly to the consumer
marketplace when they have previously sold almost exclusively to
businesses. This fundamental change in orientation opens up an
increasing demand for innovation to help health insurers shift their
gaze from the group to the individual.

The first great investment opportunity afforded by the changing
healthcare marketplace has been in the private HIXs themselves. One of
the first healthcare exchanges to receive venture funding was Extend
Health in 2007, well before anyone had ever heard of the Affordable Care
Act. Psilos Group, the investment firm where I work, was the lead
investor in Extend Health, which is currently serving hundreds of
thousands corporate retirees at companies like General Motors, GE, IBM,
and FedEx.

When Psilos invested in Extend Health, the company was one of the only
private exchanges in the country. Last year, we realized more than a 10x
return when Towers Watson acquired Extend Health for $435 million. Aon
Hewitt, another large health benefits administration company, acquired
Senior Educators, a competing venture-backed private exchange,
delivering a 3x-5x return to the company's investors. Towers' and Aon's
new business units are prime examples of how private healthcare
insurance exchanges will radically reshape the way Americans shop for
healthcare insurance. We have seen a large wave of private HIX companies
and related technology-enablers follow their footsteps through venture
capital's doors.

Educating the Consumer

Unfortunately, the HIXs are far more mysterious to consumers than should
be the case. As a result, the HIXs also need new products and services
that help educate and engage consumers of all types, whether they are
from underserved populations or being dropped from their Blue Chip
employer's Cadillac health plan. In a post-reform environment, there
will be an even greater need for educational tools and "plain-English"
translation of medical and insurance information to help consumers make
good choices and manage their new-found clinical and financial
accountability, as well as customer service capabilities when they fall
short of the mark. Each of these areas is ripe for innovation and
investment.

Filling the Toolbox

As HIXs become an increasingly common way for people to buy insurance,
they will require a whole new array of capabilities to respond to
consumer demands. Consumer decision-support and personalization tools
are necessary to help millions of new customers select the best plan and
take best advantage of its features. The HIXs need everything from call
centers to enrollment, shopping and financial software–to serve tens of
millions of people efficiently.

There is also an increasing need for financial services products that
help people pay their insurance premiums, especially those who do not
have credit cards or bank accounts or who live paycheck to paycheck.
Some may not get adequate subsidies or have consistent-enough regular
income to pay the new required monthly premiums exactly on schedule and
those people will need special credit facilities. For those enrolled in
high deductible health plans, which now serve more than 1/3 of the U.S.
insured population according to the Kaiser Family Foundation, there will
be further demand for financial products to manage the different buckets
of money that come into play as healthcare services are utilized.

Let's Not Forget the Care Itself

A companion investment opportunity is consumer-facing engagement
technologies and services that help people make better self-triage
decisions about where and when to get care in oder to maximize the value
of their chosen health plan. For instance, a consumer might save money
and time by using a nursing hotline for self-triage in non-critical
situation or telemedicine services when the only locally available
alternatives are high cost and hard to access. New products that
encourage compliance with medication regimens or allow people to be
treated at home instead of in the hospital are also gaining currency and
investment interest from the venture capital community.

Turning Chaos Into Gold

While much of the U.S. populace sees chaos as they watch Obamacare
unfold, the investment community sees opportunity to prosper. Times of
massive system transformation, such as we are in today, pave the way for
new market entrants and disruptive technologies a la Clayton
Christensen's stories about other industries that have endured dramatic
change. The HIX and associated products and services that are catalyzed
by their existence may just be the NetFlix to the old insurance model's
Blockbuster. In a world where such disruptive innovation might also
bring about a healthier populace, it is a fine time to be an investor
who can do well by doing good.

(Lisa Suennen is a co-founder and Managing Member of Psilos Group, a
healthcare-focused venture capital firm with approximately $600 million
under management.)

Comment: Only in America do we have an outrageously priced health care
system that, by design, brings more gold to our venture capitalists and
other one-percenters, while creating greater financial barriers for
those who actually need health care. Instead of a public national health
program which would have worked well for the people, our politicians
insisted on leaving control in the private sector. The private sector
will always go for the gold and leave everyone else behind.

Lisa Suennen is correct that we need disruptive innovation, but she
totally misses the goal. It is the private insurance industry that needs
disruption, but not to heap more gold on the investors, but rather to
improve affordability and access to health care for all of us. The
private insurers are doing the opposite - shifting more costs onto our
backs while using narrower networks to further limit our access. Let's
disrupt them!

Quote of the Day Editorial
October 11, 2013
Inequality for All
By Don McCanne, qotd editor

Yesterday, my wife Sandy and I had the pleasure of joining a group from
our local chapter of the League of Women Voters in viewing the new
documentary, Inequality for All, featuring former Labor Secretary Robert
Reich. The lesson of the film did not escape those attending. The last
couple of decades have left low- and middle-income people behind while
all of the workers' gains in productivity have moved up to the very
wealthiest.

This is an important issue for those who support single payer reform -
improved Medicare for all. The average health care costs for the typical
working family of four are now over $22,000 while the median household
income is $50,000. If everyone is going to have the health care that
they need, some of that wealth flowing upwards needs to be redirected to
health care, and to other social needs as well.

Some of the wealthy one-percenters do understand this. Featured in the
documentary was entrepreneur and venture capitalist Nick Hanauer. The
following link is to a six minute TED video in which Nick explains the
phenomenon and why it is important to us. (For political reasons, TED
removed this video from its website, but it is still available through
YouTube.)

In our dinner discussion after viewing Inequality for All, some
commented that, though the film explained the problem well, it seemed to
leave off any plan for action. It does not require much intuitiveness to
think of what actions we might take, though the website for the film
does help us by discussing six categories for action:

For those who would like to learn more, Berkeley Professor Emmanuel
Saez, who was also featured in the documentary, has published
extensively on this topic. Many of his papers - several co-authored by
Thomas Piketty - can be downloaded from his website:

Health Affairs Blog
September 30, 2013
Where To Compete In A Post-Reform World
By Shubham Singhal, senior partner in McKinsey's Detroit office

The power of "where-to-compete" decisions, particularly in an industry
in as much flux as US health insurance, is enormous. Our analyses
suggest that the bottom-line performance differential between a payor
who selects a market-average portfolio across businesses and geographies
and an identical payor who instead selects a top-quartile portfolio is
likely to be almost twofold. Across industries, McKinsey research shows
that the majority of the performance differential among corporations
results from their alignment with "rising tide" markets rather than from
share gain within less attractive markets.

Furthermore, we have found that there are three "macro" approaches that
can enable companies to thrive during major industry disruptions:
refocus their portfolio on more attractive businesses, build one or two
large new businesses, or radically transform their business model. The
first two rely squarely on where-to-compete decisions. The last approach
is not for the faint of heart.

Thus, today's payors must carefully choose which markets they want to
concentrate their resources on to win. The choices made will be critical
not only within the payors' core health-plan business but also in
adjacent areas within the healthcare value chain.

***

Given the disruptive changes in the healthcare industry, payors that
want to thrive over the next few years will need to develop the
discipline to make and act on where-to-compete decisions. They will need
insights into where growth and margin will be earned, the foresight to
determine when inflections points in the market might happen, a clear
view of their own competitive advantages and capabilities (which would
give them the ability to win and earn a superior return), the fortitude
to make tough resource-allocation decisions, and the agility to alter
their course as the market shifts. Acquiring the needed discipline is
challenging but necessary. The upside from getting where-to-compete
decisions right is substantial enough to demand top management's
attention — and the downside is potentially fatal.

Kaiser Health News
October 4, 2013
Marketplace Plans Vary Widely In Costs, Within Counties And Across The
Country
By Jordan Rau and Julie Appleby

Consumers shopping in the new health insurance marketplaces will face a
bewildering array of competing plans in some counties and sparse options
in other places, with people in some areas of the country having to pay
much more for the identical level of coverage than consumers elsewhere.

Nationwide, 18 percent of counties have only one insurer offering plans
and 33 percent of counties have only two insurers competing, the KHN
analysis found.

Comment: Private insurers are a totally different animal than public
health coverage programs, and this "where-to-compete" industry advice
typifies that difference.

Public programs, such as Medicare, make every effort to deliver health
care to those that need it. Private insurers make every effort to ensure
the success of their business model.

Mimicking Willie Sutton's famous strategy to rob banks because that is
where the money is, private insurers "carefully choose which markets
they want to concentrate their resources on to win." The Kaiser analysis
shows that one-third of counties have only one or two insurers offering
plans. According to the McKinsey advice, for the insurers covering those
counties, the decision is "potentially fatal."

The Affordable care Act has put the wrong people in charge. We can
change that. Fix Medicare and then provide it for everyone. Let's
replace "where-to-compete" with "where-to-provide-care."